Activist hedge fund Starboard Value, which upped its stake yesterday in AOL to 5.1 percent, is quietly preparing to launch a battle for board seats as early as next week, The Post has learned.

The $1 billion hedge fund, run by former Ramius money-manager Jeffrey Smith, is gearing up to nominate its own slate of directors after calling on AOL in December to overhaul its money-losing media strategy, sources said.

The move could mark the first step toward an all-out proxy fight leading up to the company’s annual shareholder meeting. While AOL hasn’t set a date, the meeting is usually held in May.

“They will nominate [directors] next week unless they come to an agreement with the company before then,” said one person familiar with the situation.

Smith fired his first warning shot in December with a letter questioning CEO Tim Armstrong’s plan to turn AOL into an online media empire by investing in so-called display ad sites such as the Huffington Post, which AOL bought for $315 million last year. AOL is losing in excess of $500 million a year on its display ad business, Smith said.

Yesterday, Smith fired another shot, disclosing in a regulatory filing that Starboard had raised its AOL stake to 5.1 percent from 4.5 percent.

Smith also reiterated his concerns over AOL’s “massive operating losses in its display business … and further acquisitions and investments into money-losing growth initiatives like Patch,” its hyperlocal news venture.

Starboard, AOL’s fifth-largest shareholder, bought shares in December for as low as $13.87, but has since been buying as high as $18 a share, suggesting that it’s sticking by its guns.

AOL’s stock popped after the company announced better-than-expected earnings for the fourth quarter earlier this month. Although profit plunged 66 percent from the previous period, the results still beat Wall Street’s expectations. AOL also grew ad revenue 10 percent.